Oversupply from new harvest drives down Russian wheat prices

Wheat prices in the European part of Russia have seen a significant drop, with fourth-class wheat experiencing a notable weekly decline.

As of July 16, average prices for fourth-class wheat (12.5% protein) in the European part of Russia fell by 775 rubles week-on-week to 13,825 rubles per metric ton ($177/mt), according to SovEcon’s price monitoring.

The market experienced a reversal in wheat prices following a brief period of upward movement. 

This decline was primarily attributed to the increased supply of wheat as the new crop began to arrive on the market, according to SovEcon. 

The influx of freshly harvested wheat led to an oversupply, subsequently driving down prices. This scenario is a common occurrence in agricultural markets, where the harvest season often results in a temporary dip in prices due to the surge in available product.

New crop

The agricultural landscape in Russia is currently witnessing a significant shift as the new harvest season for wheat is in full swing. 

SovEcon indicated a robust start to the crop's arrival on Russian markets, signaling a promising year for the nation's grain output. 

As of July 18, the latest figures show that Russia has already successfully harvested an impressive 23.9 million metric tons of wheat. 

This early and active influx of new crop into the markets is a critical indicator for both domestic supply and potential export capacities, suggesting a healthy and perhaps even abundant yield this season. 

The accelerated pace of harvesting, coupled with the substantial volume already gathered, positions Russia strongly in the global wheat market.

“A significant share of the harvested crop is coming from the South (20.9 mmt), but harvesting is gradually shifting to the central regions,” SovEcon said.

As of July 18, wheat harvesting has reached 6.9 million hectares, yielding an average of 3.5 metric tons per hectare, according to SovEcon. 

This is a decrease compared to last year's figures of 9.8 million hectares harvested and an average yield of 3.7 metric tons per hectare.

Wheat prices

Previously, sluggish harvesting and poor yields in Russia's southern regions bolstered Russian wheat prices.

As of early July, Russia had harvested 2.5 million hectares, significantly less than the 15.3 million hectares harvested during the same period last year, SovEcon data showed. 

Current yields are also lower, at 3.2 metric tons per hectare compared to 4.4 metric tons per hectare a year ago.

Wheat prices started falling last year in late May due to an early harvest. They reached their lowest point in early August, around the time the winter wheat harvest was almost finished.

Russia's wheat harvest is projected to be 83.6 million metric tons, according to SovEcon, a slight increase from last year's 82.6 million metric tons. The US Department of Agriculture’s forecast is very similar, at 83.5 million metric tons.

Andrey Sizov, managing director at SovEcon said: